“I bless the rains down in Africa
Gonna take some time to do the things we never had” TOTO
There are over two billion people in the world who still do not have a bank account. Most of them live in the emerging markets (Africa and the Asian Pacific Region making up the bulk) However, even in high-income countries, millions are unable to use banks to meet their day to day financial needs.
Furthermore, swathes of the population have access to a bank account, but do not have adequate access to the financial services that banks can provide. These people are known as the underbanked. It may come as a surprise that in the United States this represents over 25 percent of the population! Without access to what many take for granted; savings and credit, this populace remain in the vicious cycle of poverty.
As we all know the world of microfinance provide a much needed way for the unbanked and underbanked to access much in demand credit. This, however, only increases the cycle of debt as banks charge extortionate interest rates, to off -set the risk. Debt often ends up being only partially paid, and the poverty cycle continues.
Blockchain; A global Panacea
Blockchain technology has the potential to help the unbanked and underbanked by allowing them to create their own financial alternatives in a clear and systematic way. The greatest challenge banks face when trying to serve the unbanked is that many of them do not have clear identifying information, making it difficult to implement the regulatory requirements to set up an account.
Blockchain provides individuals with a digital identity for use in their banking. It makes remittances simple and efficient. Blockchain can even encourage and permit low-income individuals in different countries to save and lend together.
How does this work in practice?
There are already a plethora of Ethereum based Blockchain projects that have made serving the unbanked and underbanked their main focus.
Their products do the following;
*enable peer-to-peer value exchange and payments using a digital wallet platform.
* enable the unbanked to have control over their financial lives and access financial services previously unavailable.
* allows users to create Rotating Savings and Credit Associations on the Blockchain.
* allows individuals to build a Blockchain powered credit score.
* enables blockchain and biometrics to create apps that would allow transactions and investment in the third world.
*earn tokens at home, using bio-identification procedures, and exchange those tokens for local currencies in an app.
* allow those without any formal identification to have an opportunity to create a digital bio-identification straight from their smartphones.
Towards the new global banking nirvana
Even simple things like building savings or receiving a loan can be difficult for these two billion people. It keeps them grounded in the cycle of poverty. Blockchain provides a secure, scalable way to serve the needs of these individuals. Many technology companies are leveraging it to usher in a world in which everyone has access to the savings and credit that is an essential building block for economic growth.